• Justin Hein

Disputing Termination of At-Will Employment

Public policy, implied contract, and covenant of good faith & fair dealing are exceptions to CA employment-at-will.

At-will employment is the default doctrine of California employment law. It defines the most common employment relationship where either party may mutually terminate the relationship without the fear of liability.

Under this legal doctrine, any hiring by an employer is presumed to be at will, meaning that the employer is free to discharge the employee for good, bad, or no reason at all, and the employee is equally free to quit or cease appearing at work with or without notice.

But What Does This Mean?

That means without notice termination, in of itself, is not wrongful. The fact that an employer decided to terminate you in the middle of a shift on a Tuesday, in of itself, is not going to give you grounds to challenge the termination, file a lawsuit, and recover damages.

Furthermore, an employer is not obligated to pay severance. Just because employer A always provides 1-month of severance to no-fault, no-notice terminations, does not mean it has to do so. There is nothing in the law requiring the employer to do so.

And it also means that an employee is not required to provide notice of resignation. Although 2-weeks notice is customary in the business world, there is no legal requirement for it. And an employer cannot take action against an employee for failing to give such notice.

So When is Termination Wrongful?

In California, there are three major exceptions to the employment-at-will doctrine. The exceptions address terminations that, although they technically comply with the at-will employment doctrine, California legislature or courts have determined are inherently unjust. These three exceptions are explained in greater detail below. Please note, that not every state recognizes all three exceptions. In fact, California is only one of a handful of states that recognizes them all.

Public policy Under the public-policy exception to at will employment, an employee can be wrongfully discharged when the termination is against an explicit, well-established public policy of the State. This typically is a result of terminating an employee for being in a protected class, for engaging in protected conduct, or for being in a protected status. For example, an employer cannot terminate an employee due to race, gender, disability, or other protected class. California recognizes over 18 protected classes. Furthermore, in most States, an employer cannot terminate an employee for filing a workers’ compensation claim after being injured on the job, for whistle-blowing unsafe or illegal working conditions or conduct, or for refusing to break the law at the request of the employer. Both the filing of the claim and refusal to break the law is protected conduct. Finally, an employer cannot terminate an employee for being on a disability leave, on workers compensation leave, on paid sick leave, or any other protected temporary status.

California courts have defined the exception as being anything with the “tendency to be injurious to the public or against the public good.” The majority view is that the underlying public policy may be found in the constitution, statute, or administrative rule.

The public-policy exception is the most widely accepted exception, recognized in almost all 50 States. Most if not all have codified these exceptions as being violations of statutory law.

Implied contract The second major exception to at will employment is applied when an implied contract is formed between an employer and employee, even though no express, written instrument regarding the employment relationship exists. Although at will employment is typically not governed by a contract, an employer may make oral or written representations to employees regarding job security or procedures that will be followed when adverse employment actions are taken. If so, these representations may create an implied contract for employment.

A common occurrence is that the contents and representations made in employee handbooks could create an implied contract, absent a clear and express waiver. The typical situation involves handbook provisions that state that employees will be disciplined or terminated only for “just cause” or under other specified circumstances, or provisions that indicate that an employer will follow specific procedures before disciplining or terminating an employee. In addition, a hiring official’s or supervisor’s verbal statements and/or behavior towards an employee, such as saying that employment will continue as long as the employee’s performance is adequate, may also create an implied contract.

Covenant of good faith and fair dealing The rarest exception to at will employment among the states is the covenant of good faith and fair dealing. This concept is a significant departure from the traditional at will employment doctrine. It actually reads a covenant – a promise – into the relationship between employer and employee. That promise is that the employer will not engage in adverse employment action arbitrarily, maliciously, or in bad faith.

In California, the law implies a covenant of good faith and fair dealing in every contract. This is then used by the courts to protect the reasonable expectations of the parties entering into the contract. Thus, the relevant inquiry always will focus on the contract itself, to determine what the parties did agree to.

It exists merely to prevent one contracting party from unfairly frustrating the other party’s right to receive the benefits of the agreement actually made.

Other Potential Liability

Beyond wrongful termination, employees can sometimes assert claims based upon other tortuous conduct by their employer. For example, infliction of emotional distress, promissory estoppel, negligent supervision, defamation, and/or interference with contract are all possible theories of liability that could be triggered by termination of employment, even in an at-will employment context. However, all of these potential causes of action are typically only viable if additional facts, circumstances, or evidence exist beyond just the termination of employment.

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